Yakunenko K. Ukraine’s Integration to the European Energy Community (the case of coal-fired power generation).

Ukraine’s accession to the Energy Community (EnCom) poses something of a paradox from the perspective of European integration theories. This research paper aims to develop an eclectic approach to understanding this paradox in a wider context of European integration per se and electric industry particularly, and to evaluate selected spillover effects into Ukraine’s coal-fired electric industry. We begin with analysis of an important but largely overlooked reciprocal nexus between origins of economic integration in electric industry and genesis of European integration theories. It is found that an important part of intellectual background of functionalist logic behind the European Coal and Steel Community (ECSC) is Tennessee Valley Authority (TVA), an anti-crisis integration project focused on electric industry and led by Franklin Roosevelt starting 1933 in the US. Then, European integration theories are applied to grasp a larger picture: TVA can be considered a prototype of ECSC and the latter is clearly a model for the contemporary EnCom. Particularly, we conclude that establishment of the EnCom in 2005 can be explained by neofunctionalism theory and the EnCom’s further dynamics, primarily enlargement with accession of Ukraine and Moldova in 2011, can be expounded by intergovernmentalism theory. Thereupon, a historical analogy between EnCom and ECSC is revealed: with a first wave of enlargement, both foundations are no longer explained by neofunctionalism and require additional insights from the perspective of intergovernmentalism. This paper also reviews seismic changes in electricity economics in the environment of European integration starting 1990s, key dimensions and current trends of economic integration in electricity where EU and EnCom interact directly, and Ukraine’s priorities in further integrating its electric industry into the EnCom. The pointed out priorities are: fully-fledged synchronization of domestic power system into the pan-European ENTSO-E grid, development of competitive renewables, implementation of the Third Energy Package and, specifically, ecological modernization of its obsolete coal-fired power generation. Finally, a dynamic deterministic accounting-framework model of Ukraine’s coal-fired generation is developed to forecast quantitative effects from implementation of Large Combustion Plants Directive, a huge part of the Third Energy Package. We conclude that the ecological modernization is financially feasible provided that investors get guaranteed returns on their capital (calculated by the author), investment costs are entirely priced in and financial leverage is stabilized at the level of global industry peer group. The estimated annual damage in value terms is expected to be cut 4x by 2026. As an overall conclusion, Ukraine’s international commitments are effectively the means to solve domestic problems.